In the years before becoming eligible for Medicare, what are some ways to purchase health insurance?
By Jason Ramage, CFP
Health insurance is understandably one of the top concerns for people considering retirement before Medicare eligibility, generally at age 65. Since it is largely tied to our employment, this benefit can be like a golden handcuff for the middle class.
Yet, I believe life is too short to remain stuck in place for too long. What I hope to provide here is a summary of all the obvious-to-creative ways you might find coverage while taking a mini- or early retirement. There’s no magic here – a modest lifestyle goes a long way since you’re likely to live off savings for a time, though you might have a working spouse or partner without group benefits. Hopefully, you’ll find an idea here that allows you to move on while keeping yourself and your family covered.
Shopping the Marketplace
Despite its faults, the Affordable Care Act (ACA) is the primary path for many people to secure employer-like coverage separate from an employer. You can use the federal government’s site at Healthcare.gov, your state exchange (if available), or a third-party site like eHealth to shop plans.
Your main benefit is securing genuine insurance coverage that provides for a federally mandated level of coverage, including pre-existing conditions, maternity, and routine care.
One drawback is provider networks are state-specific. While emergencies may be covered on the road, frequent travelers might need a nationwide network. Unsubsidized premiums are relatively expensive. However, without earned income, it’s easier to qualify for subsidies. Good advice and flexibility are essential in taking this route and adapting to changing rules.
Staying a Groupie
Wait a second – wasn’t the premise of this article about ditching group coverage for greener pastures? Here are a few ways you might qualify for group coverage while keeping with the theme.
Married couples and domestic partners have a relatively easy option. Some couples never consider changing an arrangement that’s worked so far, yet one of you may need a break from the 9-5 while the other is happy or would like a steady job with benefits.
Most of us know about the appropriately titled COBRA route. This is where you come face to face with the bite your employer’s portion of the insurance bill will take out of your cash flow (ignoring temporary subsidies). Still, you might have already met a high deductible on your plan, need access to an out-of-state provider, or already pay most of the premium even as an active employee. If it makes sense in your case, generally you can use COBRA for up to 18 months following a voluntary termination.
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Moving to overlooked options, you might take a leave of absence. This is probably most feasible with several years of solid performance with a large employer – or an excellent relationship with a small company. Still, it’s worth looking up the leave policy in your benefits handbook. If there’s an allowance for retaining group benefits, this might be your ticket.
If entrepreneurship is on your radar, check for industry organizations offering group health plans. You may be required to establish a business or have an employee, but these plans may be more competitive than the marketplace. Plus, your coverage should include a nationwide network and qualify as a deductible expense against your business income.
Part-Time Work or School
Several companies with relatively relaxed work environments are known for offering benefits to part-timers. Starbucks and Chipotle come top of mind; others include Publix, REI, Costco, IKEA, Home Depot, Lowe’s, UPS, and FedEx. You’ll find more searching online and among companies in your region.
On the same note, enrolling in on-campus classes normally qualifies for student health insurance. As an example, the premium at a local university comes to $554 per month for a family of three with a $500 deductible. You’ll need to plan on returning to campus (pandemic arrangements aside) and arrange for financial aid or tuition reimbursement.
Looking internationally opens interesting options, whether it’s teaching English, Peace Corps or missionary programs that provide insurance coverage. If you’re looking to be in pure vacation mode, a travel insurance policy may be sufficient. Covering my family of three could easily cost less than $500 per month – although adding maternity coverage more than doubles the premium!
While the individual mandate to purchase an ACA plan stands, there is currently no penalty for those who opt-out. However, this is where the Wild West begins. These are typically short-term or indemnity plans with many exclusions that you might take for granted with group or ACA plans (such as maternity, limited networks, and pre-existing conditions). In your favor, these are regulated insurance plans, and your lower premium is generally focused on covering catastrophic care.
Lastly, cost-sharing ministries gained more attention after the ACA penalty was repealed. These started decades ago as Christian ministries, yet newer entrants to this market may have little or no religious expectation. These plans are not insurance. Legally, that means providers look to you as the primary payer for care, and you have no recourse to your state insurance board. Naturally, your out-of-pocket cost is expected to be lower than unsubsidized ACA plans, and nearly all providers will be covered although certain treatments may be excluded.
Some people enroll in a combination of non-ACA insurance with a ministry plan to layer coverage.
Finally, planning for Medicare starts as early as deciding when to start collecting Social Security benefits. If you’re already collecting Social Security, Medicare Part A begins automatically at age 65. However, if you delay Social Security and have creditable health and drug insurance (usually through an employer) you can delay Medicare until your creditable coverage ends without penalty. Personalized advice is highly recommended as you navigate the timing of Social Security and Medicare benefits.
About the Author: Jason Ramage
Jason Ramage is a Paraplanner for TouchPoint Wealth Partners in Cincinnati, Ohio, a Member Firm of Valmark Financial Group. To him, financial planning is about helping people be financially successful while living the life they are made for. He enjoys the adventure of raising a family, board games, cycling, camping, and delicious finds at Japanese convenience stores.
This article is for informational purposes only and is not providing investment or tax advice. Please consult with an advisor concerning your personal situation. Among the companies mentioned in this article, Jason owns a position in FedEx (FDX). Companies are named solely as examples with no intended investment recommendation.